Loans and Allowance for Credit Losses | Allowance for Credit Losses and Asset Quality Net Loans are summarized as follows: September 30, December 31, 2019 (in thousands) Real estate - commercial mortgage $ 7,046,330 $ 6,700,776 Commercial and industrial 5,968,154 4,446,701 Real-estate - residential mortgage 3,061,835 2,641,465 Real-estate - home equity 1,222,709 1,314,944 Real-estate - construction 1,007,534 971,079 Consumer 469,551 463,164 Equipment lease financing and other 274,570 322,625 Overdrafts 1,694 3,582 Gross loans 19,052,377 16,864,336 Unearned income (23,756) (26,810) Net Loans $ 19,028,621 $ 16,837,526 The Corporation segments its loan portfolio by "portfolio segments," as presented in the table above. Certain portfolio segments are further disaggregated by "class segment" for the purpose of estimating credit losses. See "Allowance for Credit Losses" below for further discussion regarding portfolio and class segments and their impact on the determination of the ACL. Allowance for Credit Losses, effective January 1, 2020 As discussed in Note 1, "Basis of Presentation," the Corporation adopted CECL effective January 1, 2020. CECL requires estimated credit losses on loans to be determined based on an expected life of loan model, as compared to an incurred loss model (in effect for periods prior to 2020). Accordingly, ACL disclosures subsequent to January 1, 2020 are not always comparable to prior periods. In addition, certain new disclosures required under CECL are not applicable to prior periods. As a result, the following tables present disclosures separately for each period, where appropriate. New disclosures required under CECL are only shown for the current period and are noted. See Note 1, "Basis of Presentation", for a summary of the impact of adopting CECL on January 1, 2020. Under CECL, loans evaluated individually for impairment consist of non-accrual loans and TDRs. Under the incurred loss model in effect prior to the adoption of CECL, loans evaluated individually for impairment were referred to as impaired loans. The ACL related to loans consists of loans evaluated collectively and individually for expected credit losses. The ACL related to loans represents an estimate of expected credit losses over the expected life of the loans as of the balance sheet date and is recorded as a reduction to Net Loans. The ACL for OBS credit exposures includes estimated losses on unfunded loan commitments, letters of credit and other OBS credit exposures. The total ACL is increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries. The following table presents the components of the ACL under CECL: September 30, 2020 (in thousands) ACL - loans $ 266,825 ACL - OBS credit exposure 15,533 Total ACL $ 282,358 The following table presents the activity in the ACL in 2020: Three months ended September 30, 2020 Nine months ended September 30, 2020 (in thousands) Balance at beginning of period $ 272,920 $ 166,209 Impact of adopting CECL on January 1, 2020 (1) — 58,348 Loans charged off (5,489) (27,539) Recoveries of loans previously charged off 7,847 14,660 Net loans recovered (charged off) 2,358 (12,879) Provision for credit losses (2) 7,080 70,680 Balance at end of period $ 282,358 $ 282,358 (1) Includes $12.6 million of reserves for OBS credit exposures as of January 1, 2020. (2) Includes $850,000 and $320,000 related to OBS credit exposures for the three and nine months ended September 30, 2020, respectively. The following table presents the activity in the ACL - loans by portfolio segment, for the three and nine months ended September 30, 2020: Real Estate - Commercial and Real Estate - Real Estate - Real Estate - Consumer Equipment lease financing, other Total (in thousands) Three months ended September 30, 2020 Balance at June 30, 2020 $ 102,695 $ 61,447 $ 16,391 $ 46,443 $ 12,314 $ 10,299 $ 6,948 $ 256,537 Loans charged off (746) (2,969) (393) (198) — (701) (483) (5,489) Recoveries of loans previously charged off 100 2,103 44 95 4,873 447 185 7,847 Net loans recovered (charged off) (646) (866) (349) (103) 4,873 (254) (298) 2,358 Provision for loan losses (1) 9,806 (1,743) 256 2,013 (2,177) 260 (484) 7,930 Balance at September 30, 2020 $ 111,855 $ 58,838 $ 16,298 $ 48,353 $ 15,010 $ 10,305 $ 6,166 $ 266,825 Nine months ended September 30, 2020 Balance at December 31, 2019 $ 45,610 $ 68,602 $ 17,744 $ 19,771 $ 4,443 $ 3,762 $ 3,690 $ 163,622 Impact of adopting CECL on January 1, 2020 29,361 (18,576) (65) 21,235 4,015 5,969 3,784 45,723 Loans charged off (3,925) (17,348) (1,138) (620) (17) (2,788) (1,704) (27,539) Recoveries of loans previously charged off 439 6,815 305 292 4,943 1,481 385 14,660 Net loans recovered (charged off) (3,486) (10,533) (833) (328) 4,926 (1,307) (1,319) (12,879) Provision for loan losses (1) 40,370 19,345 (548) 7,675 1,626 1,881 11 70,359 Balance at September 30, 2020 $ 111,855 $ 58,838 $ 16,298 $ 48,353 $ 15,010 $ 10,305 $ 6,166 $ 266,825 (1) Provision included in the table only includes the portion related to Net Loans. The higher provision during the first nine months of 2020 was largely driven by the overall downturn in economic forecasts due to COVID-19, resulting in higher expected future credit losses under CECL. The ACL includes qualitative adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the quantitative models. Qualitative adjustments include and consider changes in international, national, regional and local economic and business conditions, an assessment of the lending environment, including underwriting standards and other factors affecting credit quality. Qualitative adjustments used in determining the ACL increased compared to those at the time of adoption of CECL on January 1, 2020 primarily as a result of uncertainties related to forecasted economic variables due to the economic impact of COVID-19 and the future performance of loans that received deferrals or forbearances due to COVID-19. Allowance for Credit Losses, prior to January 1, 2020 Prior to January 1, 2020, the ACL consisted of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses represented management’s estimate of incurred losses in the loan portfolio as of the balance sheet date and is recorded as a reduction to Net Loans. The reserve for unfunded lending commitments represented management’s estimate of incurred losses in unfunded loan commitments and letters of credit, and was recorded in other liabilities on the consolidated balance sheets. The ACL was increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries. The following table presents the components of the ACL: December 31, 2019 (in thousands) Allowance for loan losses $ 163,622 Reserve for unfunded lending commitments 2,587 ACL $ 166,209 The following table presents the activity in the ACL for the periods indicated in 2019: Three months ended September 30, 2019 Nine months ended September 30, 2019 (in thousands) Balance at beginning of period $ 176,941 $ 169,410 Loans charged off (10,128) (20,208) Recoveries of loans previously charged off 3,814 11,300 Net loans charged off (6,314) (8,908) Provision for credit losses (1) 2,170 12,295 Balance at end of period $ 172,797 $ 172,797 (1) Includes ($46,000) and ($2.2 million) related to reserve for unfunded lending commitments for the three and nine months ended September 30, 2019, respectively. The following table presents the activity in the allowance for loan losses, by portfolio segment, for the three and nine months ended September 30, 2019: Real Estate - Commercial & Real Estate - Real Estate - Real Estate - Consumer Equipment lease financing, other Total (in thousands) Three months ended September 30, 2019 Balance at June 30, 2019 $ 54,859 $ 66,341 $ 18,981 $ 18,892 $ 4,928 $ 3,363 $ 2,869 $ 170,233 Loans charged off (394) (7,181) (498) (533) (45) (877) (600) (10,128) Recoveries of loans previously charged off 444 2,311 132 440 164 216 107 3,814 Net loans recovered (charged off) 50 (4,870) (366) (93) 119 (661) (493) (6,314) Provision for loan losses (1) (5,529) 7,710 (662) (109) (664) 798 672 2,216 Balance at September 30, 2019 $ 49,380 $ 69,181 $ 17,953 $ 18,690 $ 4,383 $ 3,500 $ 3,048 $ 166,135 Nine months ended September 30, 2019 Balance at December 31, 2018 $ 52,889 $ 58,868 $ 18,911 $ 18,921 $ 5,061 $ 3,217 $ 2,670 $ 160,537 Loans charged off (1,769) (11,863) (923) (1,322) (143) (2,355) (1,833) (20,208) Recoveries of loans previously charged off 749 6,234 552 783 1,493 1,005 484 11,300 Net loans recovered (charged off) (1,020) (5,629) (371) (539) 1,350 (1,350) (1,349) (8,908) Provision for loan losses (1) (2,489) 15,942 (587) 308 (2,028) 1,633 1,727 14,506 Balance at September 30, 2019 $ 49,380 $ 69,181 $ 17,953 $ 18,690 $ 4,383 $ 3,500 $ 3,048 $ 166,135 (1) The provision in the table only includes the portion related to Net Loans. Non-accrual Loans All loans individually evaluated for impairment are measured for losses on a quarterly basis. As of September 30, 2020 and December 31, 2019, substantially all of the Corporation’s individually evaluated loans with total commitments greater than or equal to $1.0 million were measured based on the estimated fair value of each loan’s collateral, if any. Collateral could be in the form of real estate, in the case of commercial mortgages and construction loans, or business assets, such as accounts receivable or inventory, in the case of commercial and industrial loans. Commercial and industrial loans may also be secured by real estate. As of both September 30, 2020 and December 31, 2019, approximately 93% of loans evaluated individually for impairment with principal balances greater than or equal to $1.0 million, whose primary collateral is real estate, were measured at estimated fair value using appraisals performed by state certified third-party appraisers that had been updated in the preceding 12 months. The following table presents total non-accrual loans, by class segment: September 30, 2020 December 31, 2019 Non-accrual Loans Non-accrual Loans With a Related Allowance Without a Related Allowance Total Total (in thousands) Real estate - commercial mortgage $ 15,145 $ 25,781 $ 40,926 $ 33,166 Commercial and industrial 14,326 20,948 35,274 48,106 Real estate - residential mortgage 23,637 1,256 24,893 16,676 Real estate - home equity 8,682 — 8,682 7,004 Real estate - construction 607 1,014 1,621 3,618 Consumer 235 — 235 — Equipment lease financing and other — 16,690 16,690 16,528 $ 62,632 $ 65,689 $ 128,321 $ 125,098 As of September 30, 2020, there were $65.7 million of non-accrual loans that did not have a related allowance for credit losses. The estimated fair values of the collateral securing these loans exceeded their carrying amount, or the loans were previously charged down to realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary. Asset Quality Maintaining an appropriate ACL is dependent on various factors, including the ability to identify potential problem loans in a timely manner. For commercial construction, residential construction, commercial and industrial, and commercial real estate, an internal risk rating process is used. The Corporation believes that internal risk ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal risk categories is a significant component of the ACL methodology for these loans, under both the CECL and incurred loss models, which bases the probability of default on this migration. Assigning risk ratings involves judgment. The Corporation's loan review officers provide a separate assessment of risk rating accuracy. Risk ratings may be changed based on the ongoing monitoring procedures performed by loan officers or credit administration staff, or if specific loan review assessments identify a deterioration or an improvement in the loans. The following table summarizes designated internal risk categories by portfolio segment and loan class, by origination year, in the current period : September 30, 2020 Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans converted to Term Loans (dollars in thousands) Amortized Amortized 2020 2019 2018 2017 2016 Prior Cost Basis Cost Basis Total Real estate - construction (1) Pass $ 94,758 $ 243,614 $ 196,393 $ 138,308 $ 44,315 $ 114,228 $ 47,594 $ — $ 879,210 Special Mention — 241 — — 7,103 6,106 — — 13,450 Substandard or Lower — 448 — — 760 5,822 943 — 7,973 Total real estate - construction 94,758 244,303 196,393 138,308 52,178 126,156 48,537 — 900,633 Real estate - construction (1) Current period gross charge-offs — — — — — (17) — — (17) Current period recoveries — — — — 68 4,875 — — 4,943 Total net (charge-offs) recoveries — — — — 68 4,858 — — 4,926 Commercial and industrial Pass 2,409,273 540,493 330,516 229,184 216,228 635,782 1,256,763 — 5,618,239 Special Mention 52,203 13,653 7,618 10,886 13,693 29,919 50,673 — 178,645 Substandard or Lower 38,983 1,125 15,819 11,797 13,422 25,081 64,089 954 171,270 Total commercial and industrial 2,500,459 555,271 353,953 251,867 243,343 690,782 1,371,525 954 5,968,154 Commercial and industrial Current period gross charge-offs — (106) (10) (102) (388) (117) (16,625) — (17,348) Current period recoveries 39 364 207 91 1,704 4,410 — 6,815 Total net (charge-offs) recoveries — (67) 354 105 (297) 1,587 (12,215) — (10,533) Real estate - commercial mortgage Pass 702,768 933,999 792,029 850,926 871,759 2,381,373 88,116 327 6,621,297 Special Mention 13,247 13,505 19,298 33,245 46,354 139,832 3,502 — 268,983 Substandard or Lower 1,119 2,409 13,665 39,467 9,375 88,671 1,344 — 156,050 Total real estate - commercial mortgage 717,134 949,913 824,992 923,638 927,488 2,609,876 92,962 327 7,046,330 Real estate - commercial mortgage Current period gross charge-offs — (16) (36) (2,515) (29) (1,312) (17) — (3,925) Current period recoveries — — — — 1 438 — — 439 Total net (charge-offs) recoveries — (16) (36) (2,515) (28) (874) (17) — (3,486) Total Pass $ 3,206,799 $ 1,718,106 $ 1,318,938 $ 1,218,418 $ 1,132,302 $ 3,131,383 $ 1,392,473 $ 327 $ 13,118,746 Special Mention 65,450 27,399 26,916 44,131 67,150 175,857 54,175 — 461,078 Substandard or Lower 40,102 3,982 29,484 51,264 23,557 119,574 66,376 954 335,293 Total $ 3,312,351 $ 1,749,487 $ 1,375,338 $ 1,313,813 $ 1,223,009 $ 3,426,814 $ 1,513,024 $ 1,281 $ 13,915,117 (1) Excludes real estate - construction - other. The information presented in the table above is not required for periods prior to the adoption of CECL. The following table presents the most comparable required information for the prior period, internal credit risk ratings for the indicated loan class segments: December 31, 2019 Pass Special Mention Substandard or Lower Total (dollars in thousands) Real estate - commercial mortgage $ 6,429,407 $ 137,163 $ 134,206 $ 6,700,776 Commercial and industrial - secured 3,830,847 171,442 195,884 4,198,173 Commercial and industrial - unsecured 234,987 9,665 3,876 248,528 Total commercial and industrial 4,065,834 181,107 199,760 4,446,701 Construction - commercial residential 100,808 2,897 3,461 107,166 Construction - commercial 765,562 1,322 2,676 769,560 Total construction (excluding construction - other) 866,370 4,219 6,137 876,726 $ 11,361,611 $ 322,489 $ 340,103 $ 12,024,203 % of Total 94.5 % 2.7 % 2.8 % 100.0 % The Corporation does not assign internal risk ratings to smaller balance, homogeneous loans, such as home equity, residential mortgage, construction loans to individuals secured by residential real estate, consumer and equipment lease financing. For these loans, the most relevant credit quality indicator is delinquency status. The migration of loans through the various delinquency status categories is a significant component of the ACL methodology for those loans, under both the CECL and incurred loss models, which base the PD on this migration. The Corporation considers the performance of the loan portfolio and its impact on the ACL. For certain loans classes, the Corporation evaluates credit quality based on the aging status of the loan. The following table presents the amortized cost of these loans based on payment activity, by origination year, for the current period: September 30, 2020 Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans converted to Term Loans (dollars in thousands) Amortized Amortized 2020 2019 2018 2017 2016 Prior Cost Basis Cost Basis Total Real estate - home equity Performing $ 21,247 $ 8,297 $ 14,573 $ 12,064 $ 13,006 $ 140,145 $ 995,811 $ 5,485 $ 1,210,628 Nonperforming — — 153 256 225 2,354 8,764 329 12,081 Total real estate - home equity 21,247 8,297 14,726 12,320 13,231 142,499 1,004,575 5,814 1,222,709 Real estate - home equity Current period gross charge-offs — — — — — — (1,137) — (1,137) Current period recoveries — — — — — 123 182 — 305 Total net (charge-offs) recoveries — — — — — 123 (955) — (832) Real estate - residential mortgage Performing 953,063 649,475 268,809 383,345 294,005 484,717 — — 3,033,414 Nonperforming — 832 2,437 2,611 723 21,818 — — 28,421 Total real estate - residential mortgage 953,063 650,307 271,246 385,956 294,728 506,535 — — 3,061,835 Real estate - residential mortgage Current period gross charge-offs — (68) (101) (190) (7) (254) — — (620) Current period recoveries — — 13 1 — 278 — — 292 Total net (charge-offs) recoveries — (68) (88) (189) (7) 24 — — (328) Consumer Performing 93,208 106,797 104,984 48,281 27,828 38,319 49,594 — 469,011 Nonperforming 123 68 56 62 47 162 22 — 540 Total consumer 93,331 106,865 105,040 48,343 27,875 38,481 49,616 — 469,551 Consumer Current period gross charge-offs — (500) (425) (346) (433) (642) (442) — (2,788) Current period recoveries — 48 148 116 177 891 101 — 1,481 Total net (charge-offs) recoveries — (452) (277) (230) (256) 249 (341) — (1,307) Equipment lease financing and other Performing 69,512 71,629 53,733 39,888 18,481 6,219 — — 259,462 Nonperforming — — 190 16,054 272 286 — — 16,802 Total leasing and other 69,512 71,629 53,923 55,942 18,753 6,505 — — 276,264 Equipment lease financing and other Current period gross charge-offs (1,463) (241) — — — — — — (1,704) Current period recoveries 187 136 17 16 9 20 — — 385 Total net (charge-offs) recoveries (1,276) (105) 17 16 9 20 — — (1,319) Construction - other Performing 45,386 36,764 6,614 — 16 — 17,940 — 106,720 Nonperforming — — — 181 — — — — 181 Total construction - other 45,386 36,764 6,614 181 16 — 17,940 — 106,901 Construction - other Current period gross charge-offs — — — — — — — — — Current period recoveries — — — — — — — — — Total net (charge-offs) recoveries — — — — — — — — — Total Performing $ 1,182,416 $ 872,962 $ 448,713 $ 483,578 $ 353,336 $ 669,400 $ 1,063,345 $ 5,485 $ 5,079,235 Nonperforming 123 900 2,836 19,164 1,267 24,620 8,786 329 58,025 Total $ 1,182,539 $ 873,862 $ 451,549 $ 502,742 $ 354,603 $ 694,020 $ 1,072,131 $ 5,814 $ 5,137,260 The information presented in the table above is not required for periods prior to the adoption of CECL. The following table presents the most comparable required information for the prior period, a summary of performing, delinquent and non-performing loans for the indicated class segments: December 31, 2019 Performing Delinquent (1) Non-performing (2) Total (dollars in thousands) Real estate - home equity $ 1,292,035 $ 12,341 $ 10,568 $ 1,314,944 Real estate - residential mortgage 2,584,763 34,291 22,411 2,641,465 Construction - other 92,649 895 809 94,353 Consumer - direct 63,582 465 190 64,237 Consumer - indirect 393,974 4,685 268 398,927 Total consumer 457,556 5,150 458 463,164 Equipment lease financing and other 278,743 4,012 16,642 299,397 $ 4,705,746 $ 56,689 $ 50,888 $ 4,813,323 % of Total 97.8 % 1.2 % 1.0 % 100 % (1) Includes all accruing loans 30 days to 89 days past due. (2) Includes all accruing loans 90 days or more past due and all non-accrual loans. The following table presents non-performing assets: September 30, December 31, (in thousands) Non-accrual loans $ 128,321 $ 125,098 Loans 90 days or more past due and still accruing 13,761 16,057 Total non-performing loans 142,082 141,155 OREO (1) 4,565 6,831 Total non-performing assets $ 146,647 $ 147,986 (1) Excludes $9.6 million of residential mortgage properties for which formal foreclosure proceedings were in process as of September 30, 2020. The following tables present the aging of the amortized cost basis of loans, by class segment: 30-59 60-89 ≥ 90 Days Days Past Days Past Past Due Non- Due Due and Accruing Accrual Current Total (in thousands) September 30, 2020 Real estate – commercial mortgage $ 11,867 $ 3,702 $ 2,499 $ 40,926 $ 6,987,336 $ 7,046,330 Commercial and industrial 5,326 1,228 1,950 35,274 5,924,376 5,968,154 Real estate – residential mortgage 10,686 1,180 3,394 24,893 3,021,682 3,061,835 Real estate – home equity 3,966 902 3,070 8,682 1,206,089 1,222,709 Real estate – construction — — 2,430 1,621 1,003,483 1,007,534 Consumer 1,648 436 306 235 466,926 469,551 Equipment lease financing and other 250 110 112 16,690 235,346 252,508 Total $ 33,743 $ 7,558 $ 13,761 $ 128,321 $ 18,845,238 $ 19,028,621 30-59 Days Past 60-89 ≥ 90 Days Non- Current Total (in thousands) December 31, 2019 Real estate – commercial mortgage $ 10,912 $ 1,543 $ 4,113 $ 33,166 $ 6,651,042 $ 6,700,776 Commercial and industrial 2,302 2,630 1,385 48,106 4,392,278 4,446,701 Real estate – residential mortgage 26,982 7,309 5,735 16,676 2,584,763 2,641,465 Real estate – home equity 9,635 2,706 3,564 7,004 1,292,035 1,314,944 Real estate – construction 1,715 900 688 3,618 964,158 971,079 Consumer 4,228 922 458 — 457,556 463,164 Equipment lease financing and other 552 3,460 114 16,528 278,743 299,397 Total $ 56,326 $ 19,470 $ 16,057 $ 125,098 $ 16,620,575 $ 16,837,526 Collateral-Dependent Loans A financial asset is considered to be collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of financial assets deemed collateral-dependent, the Corporation elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. In most cases, the Corporation records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less cost to sell. Substantially all of the collateral supporting collateral-dependent financial assets consists of various types of real estate including residential properties; commercial properties such as retail centers, office buildings, and lodging; agriculture land; and vacant land. Troubled Debt Restructurings The following table presents TDRs, by class segment: September 30, December 31, (in thousands) Real estate - residential mortgage $ 19,427 $ 21,551 Real estate - commercial mortgage 28,558 13,330 Real estate - home equity 14,875 15,068 Commercial and industrial 7,328 5,193 Consumer — 8 Total accruing TDRs 70,188 55,150 Non-accrual TDRs (1) 37,025 20,825 Total TDRs $ 107,213 $ 75,975 (1) Included in non-accrual loans in the preceding table detailing non-performing assets. The following table presents TDRs, by class segment, for loans that were modified during the three and nine months ended September 30, 2020 and 2019: Three months ended September 30 Nine months ended September 30 2020 2019 2020 2019 Number of Loans Recorded Investment Number of Loans Recorded Investment Number of Loans Recorded Investment Number of Loans Recorded Investment (dollars in thousands) Real estate - residential mortgage 8 $ 1,351 1 $ 830 48 $ 10,516 6 $ 2,263 Real estate - commercial mortgage 5 8,394 1 81 12 24,868 1 81 Real estate - home equity 13 1,370 12 327 40 3,556 46 2,281 Commercial and industrial 4 3,021 3 97 18 4,399 13 4,928 Consumer 3 53 — — 11 238 — — Total 33 $ 14,189 17 $ 1,335 129 $ 43,577 66 $ 9,553 Restructured loan modifications may include payment schedule modifications, interest rate concessions, bankruptcies, principal reduction or some combination of these concessions. The restructured loan modifications primarily included maturity date extensions, rate modifications and payment schedule modifications. In accordance with regulatory guidance, payment schedule modifications granted after March 13, 2020 to borrowers impacted by the effects of the COVID-19 pandemic and who were not delinquent at the time of the payment schedule modifications have been excluded from TDRs. For the nine months ended September 30, 2020, payment schedule modifications having a recorded investment of $3.8 billion were excluded from TDRs based on this regulatory guidance. |